Overviewof the Russian sugar market in 2021
Though sugar production in the 2021/2022 season showed a slight recovery (+8%, or +348 ths tonnes) from a
Production
According to the Union of Russian Sugar Producers (Soyuzrossakhar), sugar production for 2021 calendar year fell marginally (−2%), reaching 5.6 mn tonnes. The 1H production (in the 2020/2021 season) amounted to 0.4 mn tonnes, and the 2H production (in the 2021/2022 season) – to 5.2 mn tonnes. About 0.3 mn tonnes more could be produced in 2022 before the end of the 2021/2022 season.
The sugar output decline is attributable to decline of sugar content of sugar beet to 17.3% (−2 p.p.) in 2021/2022 season, with concurrent increase in beet processing volumes amid better crop results. Thus, in 2021 the plants processed 37.7 mn tonnes of beet (+7% in 2020), and in the 2021/2022 season they processed 39.0 mn tonnes, which is 25% more than in the previous season.
With annual sugar consumption at
Comment: sugar output data include sugar produced from molasses.
Source: Soyuzrossahar
Key players
By the end of 2021, five companies accounted for 68% of Russia's sugar production. Prodimex leads the market with a 19% share (–1.6 p.p.). With a 15% share (+1.4 p.p.), Rusagro ranks third. The variance in companies' share of total sugar output in the reporting period is explained by the different size of the sugar beet harvested in the regions where the companies' sugar plants operate.
Comment: sugar output data include sugar produced from molasses.
Source: Soyuzrossahar
Exports and imports
In 2021, white sugar exports from Russia fell by 62% (down 755 ths tonnes) and amounted to 454 ths tonnes. Reduced domestic sugar output drove down supplies to
Belarus, which has traditionally been the largest supplier, ramped down the sugar production and thus their imports of white sugar to Russia continued the downward trend for the third consecutive year. In 2021, this figure dropped by 12% year-on-year and reached 158 ths tonnes.
Source: railway traffic data and the Federal Customs Service data
Prices
The
State tariff regulation
A price cap on retail sugar was in effect from 20 December 2020 to 1 October 2021 to protect Russian consumers. Thus, sugar producers agreed to keep
Source: Institute for Agricultural Market Studies (IKAR)
Results of Rusagro’s Sugar Business in 2021
Rising sugar market prices in 2021 pushed the revenues of Rusagro’s Sugar Segment up by 29%, which totalled RUB 36.4 bn (up RUB 8.2 bn). Coupled with a 2 p.p. improvement in EBITDA margin, this led to a 41% increase in adjusted EBITDA (up RUB 2.6 bn) – up to RUB 9.0 bn.
Operating results
Financial results
Assets overview
Sugar plants
In 2021, maximum sugar beets processing capacity of Rusagro’s plants remained flat with the previous year — 53,850 tonnes of beets per day. The maximum production capacity of the Company during the season time (from August to July) is about 900 ths tonnes of beet sugar, excluding sugar from
Rusagro’s sugar beet processing plants produce two main
CEREAL PRODUCTION
The Company's assets include JSC Gerkules cereal plant, a grain-processing facility with its own packaging line. The plant produces buckwheat and crushed buckwheat for the B2B channel and packaged buckwheat and rice for the B2C channel.
Rusagro’s Sugar Business is represented by nine sugar plants located in the Tambov, Belgorod, Kursk, and Orel Regions in close proximity to the sugar beet cultivation areas of the Company’s Agriculture Business. In the Tambov Region, the Company runs the Znamensky, Nikiforovsky and Zherdevsky sugar plants, in the Belgorod Region – Chernyansky, Nika and Valuysky plants, in the Kursk Region – Krivetsky and Kshensky plants, in the Orel Region – Otradinsky plant.
Brands
The Company’s product portfolio includes five sugar brands of different price brackets: Russkii Sakhar, Chaikofsky, Brauni, Mon Café and Khoroshiy, as well as the Tyoplye Traditsii brand. Over years, the Company lead the way in the consumer sugar market, and the Russkii Sakhar, Chaikofsky, Brauni and Mon Cafe brands hold the first positions in their relevant segments. The Company’s sugar brands are also the most sought-after brands among Russian consumers – Russkii Sakhar and Chaikofsky brands enjoy consistently high recognition and loyalty.
Investments
Due to the lack of new
AUTOMATION AND INNOVATION
The strategic goal of Rusagro's Sugar Business is to reduce sugar losses in all sugar beet production cycles, and Industry 4.0's best practices and solutions – from physical devices to bio-engineering solutions – are being used to achieve this goal. The most active work is focused in three key areas, which include raw material management, production, and storage and logistics of products.
Procurement of raw materials
Automated beet procurement and plant logistics management system
Reducing losses and higher accuracy of sugar beet residue management
Sugar production
Sugar production monitoring system with elements of artificial intelligence (AI)
Unbiased production data and reduced losses in sugar beet processing
Storage and logistics
Automation of outgoing inventory and introduction of a transportation management system (TMS) based on unique mathematical algorithms
Reduced cost of sales delivery by devising optimal routes
In addition to technology-related projects, Rusagro's Sugar Business is exploring innovative products as alternatives to traditional sugar. In 2021, for example, the Company decided to launch long-term projects in 2022 to produce a new generation of zero-glycaemic index sweeteners to replace fructose and synthetic sweeteners in diabetic and dietary products, and to produce sweet proteins from micro-organisms for use in various food industries.
Operating results
Production
The beet processing volume in 2021 totalled 4.6 mn tonnes (+13%) and in the 2021/2022 season – 4.7 mn tonnes (+27%). Similar to the last year, 75% of the beets were purchased from Rusagro’s Agriculture Business. In the reporting season, the plants worked for 74 to 131 days (74 to 100 days in the 2020/2021 season), from 1 September 2020 to 16 January 2021. The average sugar content of beets at a time of reception was 19.0% (not including sugar recovered from molasses), down 1 p.p. against the previous season figure.
For the last year, Rusagro produced 791 ths tonnes of sugar, +4%
Sales
In 2021, sugar sales amounted to 769 ths tonnes, down 5%
Consumer segment
In 2021, 30% of sugar sales (+8 p.p.) fall on the consumer segment. Sugar sales of the own branded products amounted to 146 ths tonnes, 4% below the 2020 level. During the reporting period, Russkii Sakhar and Chaikofsky brands retained theire leading positions in the Russian white cube sugar market, while Brauni led the way in the brown cube sugar market.
According to AC Nielsen’s survey for November 2021, the combined market share of Rusagro’s four sugar brands – Russkii Sakhar, Chaikofsky, Mon Cafe and Khoroshiy – was 48% (+2 p.p.) on the cube white sugar market: Russkii Sakhar gained 33% market share (+1 p.p.) and Chaikofsky – 14% (+3 p.p.). Brauni accounted for 28% (−1 p.p.) of the brown cube sugar market in Russia.
According to Tiburon data, in 2021 Russkii Sakhar and Chaikofsky brands again showed a high level of brand recognition – for Russkii Sakhar it was 86%, for Chaikofsky – it stood at 61%.
Exports
In 2021, Rusagro exported 202 ths tonnes of products, down 21%
Financial results
In 2021, Rusagro’s Sugar Segment revenues rose by 29% to RUB 36.4 bn (up RUB 8.2 bn), despite declining sales volumes (−5%) on the back of lower sugar production in the 2020/2021 season. As some of the sugar sold in the reporting period was produced in the previous season with a lower production cost, the growth rate of sugar sales revenue was higher than the growth of sugar beet procurement costs. This resulted in an increase in adjusted EBITDA margin by 2 p.p. to 25% and in adjusted EBITDA by 41% to RUB 9.0 bn (up RUB 2.6 bn).